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Help to Buy equity loan scheme set for record year

The Government’s flagship Help to Buy equity loan scheme is on track for a record year in 2017.

Figures published by the Ministry of Housing, Communities and Local Government show that more than 32,000 new-build homes were purchased using one of these Government-subsidised loans in the first three quarters of last year. This compares to just over 26,000 homes in the equivalent period the previous year.

In total, more than 350,000 people have now used Help to Buy schemes to purchase a property. More than 144,000 completions have taken place using the equity loan scheme, 81% of which were made by first-time buyers.

The remainder of these purchases have used the Help to Buy ISA savings scheme, launched two years ago for first-time buyers. More than a million of these tax-efficient savings schemes have now been opened.

The vast majority of these property purchases – 93% – have been made outside of London.

The Help to Buy equity loan scheme offers a Government-backed loan for up to 20% of the purchase price of a new build property (40% in London). No interest is due on this loan for the first five years.

The Ministry figures show that since this scheme was launched the value of these Government loans was £7.39bn. The total value of properties sold under this scheme is £35.3bn.

However, Search Acumen director Andy Sommerville pointed out that take up of this equity loan scheme has tapered since the middle of 2017. There were 11,168 homes bought using Help to Buy in the second quarter of 2017, falling to just 8,182 in the third quarter.

He went on to expressed concern that this scheme is simply “creating and sustaining a broken system”. As he pointed out, the average price of a first-time buyer property has increased at a much faster rate than first-time buyer wages.

“We hope the incoming housing minister, Dominic Raab, and the newly augmented MHCLG can find new ways to support first-time buyers more sustainably than we are today.”

Private Finance director Shaun Church said: “Given that the average value of a property through the Help to Buy scheme falls around £200,000 this scheme is clearly successful in benefiting its intended audience.

“Consistently growing take-up of the equity loan scheme suggests the market would benefit from more high LTV mortgage products, though the availability of these has improved significantly in recent years.”

He pointed out that the original adopters of the equity loan scheme will start to incur interest charges on these loans this year, which could motivate them to move up the property ladder.

He added:

“Our own analysis shows many areas, particularly the south of England, have enjoyed significant house price growth since 2013 putting buyers in good stead to repay their equity loan debt.”

But he added those who have bought in areas that have experienced “more limited” house price growth will have to look to alternative methods of setting their debts before they can climb the property ladder.

Economic secretary to the Treasury, John Glen said:

“Help to Buy is part of our wider plan to tackle the housing challenge and ensure the next generation can get on and climb up the housing ladder.”

New housing minister Dominic Raab added: “Thanks to our Help to Buy: Equity Loan scheme the dream of home ownership continues to become a reality for thousands more households across the country.”

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.